Volatility Now the Watchword

The headline “Job Openings Hit 3-Year High” last week in Investor’s Business Daily was interesting, considering that unemployment is currently 9.1 percent and the jobless rate has been over 9 percent for 27 of the last 28 months. In addition, nearly 43 percent of the nation’s unemployed have been out of work for at least six months, and the average duration for unemployment is now more than 40 weeks—the longest period since they’ve been keeping these statistics. The “U-6” unemployment rate is 16.2 percent; that number encompasses not just people counted in the primary unemployment figure (U-3) but also those who are working part-time but seeking full-time work as well as those who have given up looking for work.

The story below the headline indicated that employers had 3.2 million job openings in July, slightly higher than in June and the most in nearly three years. The seeming contradiction with the horrifically high unemployment numbers was well explained by John Silvia and Sarah Watt, the chief economist and economic analyst, respectively, for Wells Fargo Securities’ Economic Group in a Sept. 8 report: “Long-term unemployment arises because there is a mismatch between the skills demanded by employers and the skills offered by workers.”

Silvia and Watt went on to explain, “Construction workers cannot easily move into computer technology or software development. Moreover, the price of adjustment is particularly high and often prohibitive for those in their middle years. Older workers have a shorter time horizon to retirement and therefore the potential return to the educational costs of developing a new career is less than the returns of younger workers pursuing the same career. It is indeed hard to teach an old dog new tricks—not impossible, just hard.”

But while older unemployed workers are having difficulty adjusting to the new economy, one of the most jaw-dropping statistics in the most recent Labor Department unemployment report was that while the unemployment rate for African-Americans overall was 16.7 percent, it was 46.5 percent among African-Americans ages 16 to 19. That figure is twice the stunningly high 23 percent rate among white teens in that age group. (Teens in school are excluded from these numbers). Privately, at least one Obama administration policymaker has begun worrying about the development of a “lost generation,” an age group that simply lacked the same opportunities as their older brothers and sisters or parents.

This column is supposed to be about politics, not economics, but in recent years it has grown impossible to write about national political trends without a heavy dose of economics. These dire conditions will be driving voters’ attitudes next year in ways that we cannot begin to understand this year. Although the political process always plays a role in the economy, the public debt-ceiling debacle has formed a nexus in voters’ minds. They watched as a dysfunctional political process vainly tried to cope with an economic challenge of enormous magnitude. Very few Americans understand the importance and global consequences of a default by Greece on its public debt, the resignation of the head of Europe’s Central Bank, or just the sovereign debt problem overall. But they know this isn’t good, and it feeds into a maelstrom of uncertainty that is encircling their lives and futures.

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Add to the economic turmoil the increased turbulence in American politics, manifested by three back-to-back “wave elections” in 2006, 2008, and 2010 as well as the fact that as of mid-August, 44 percent of Americans surveyed by Gallup said they consider themselves independents—the highest total in the history of its poll.

We are in new territory in American politics. These dynamics are very different than those leading into the last three elections or, for that matter, any previous election. As Republican pollster Bill McInturff put it so well in a recent PowerPoint presentation, we are undergoing a crisis of confidence in this country, with so many Americans having lost faith in leaders and institutions that they have effectively hit the “mute” button, choosing not to listen to leaders any further.

Both parties can see it in measurements closer to home. The Gallup job-approval numbers for Congress are horrific, with 82 percent of respondents disapproving and just 15 percent approving. The numbers for Democrats are awful, and the ones for Republicans are even worse. President Obama gave a speech on Thursday night on jobs; in post-speech Gallup tracking done Friday through Sunday night, his job-approval numbers were essentially unchanged—now 42 percent approve and 49 percent disapprove. In this political and economic climate, volatility will be the name of the game.